European leaders need to take a more “realistic” outlook on Greece and yield ground on debt forgiveness, French economist Thomas Piketty said Tuesday.
He contended that German Chancellor Angela Merkel has taken a hypocritical stance, as the German economy was given more flexibility with debt reductions after World War II. Without concessions that allow Athens to invest in infrastructure and economic growth, Greece could leave the euro zone—the so-called Grexit—and start “the beginning of the end” for the common currency, Piketty said.
“We have to get away from this very ideological approach and get to an agreement,” the “Capital in the Twenty-First Century” author said in a CNBC “Closing Bell” interview.
Leaders are negotiating a last-ditch deal after Greek voters on Sunday resoundingly rejected a creditor bailout proposal. Further trimming of Greece’s obligations has raised concerns that other debt-laden European countries may push for similar concessions in the future.
But Piketty contended that Europe has to be “very careful” about worsening its relationship with Greece. Leaders run the risk of “pushing Greece toward Russia” and seriously disrupting the common currency, he said.
“There is a big risk that this will end up very badly” if Greece and Europe fail to reach a deal, Piketty said.
He also noted that creditors have taken on unrealistic expectations for a future Greek budget surplus.